Market Update & Important Indicators
U.S. stocks edged lower Thursday, as weakening bond prices pulled down yield-sensitive sectors such as real-estate companies and utilities. The Dow Jones Industrial Average fell 0.3% in recent trading, while the S&P 500 declined 0.2%. The Nasdaq Composite was down 0.1%. The rally that sent stocks to a series of fresh records this year took a pause a day after the Dow industrials closed above 26000 for the first time. Falling U.S. government bond prices contributed to a pullback among shares of real-estate companies and utilities, which are considered alternatives to traditional bonds because of the steady dividends they tend to generate. Shares of utility companies and real-estate firms in the S&P 500 were each down 1%, making them the biggest laggards of the broad index. Shares of energy firms also struggled, as crude oil prices slipped 0.4%. Despite the decline, the S&P 500 energy sector is one of the best-performing sectors so far this year, a big reversal from 2017's dismal performance, thanks, in part, to a rally in oil prices in recent weeks. The U.S. gold price traded flatly overnight, holding steady to finish at 1,326.40 US$/oz.
The STOXX Europe 600 index closed up 0.2% at 398.73, with stocks in Germany outperforming as the DAX ended up 0.7%. But U.K. shares fell, as the FTSE 100 closed down 0.3%, weighed by a stronger pound against the dollar. France's CAC 40 ended flat, while Italy's FTSE MIB closed up 0.5%. Spain underperformed, with the IBEX 35 ending down 0.4%.
Technology companies largely outperformed across Asian bourses following gains in their U.S. counterparts. Taiwan's tech-heavy Taiex ended up 0.6% at a 28-year high. The Shanghai Composite Index rose 0.9% from its highest close since November and the Hang Seng added 0.4%, on track to reach another record high. China's economic growth accelerated for the first time in seven years in 2017, data said Thursday. The world's second-largest economy expanded at a steady pace in the last three months of 2017 to bring overall growth for the year to 6.9%, up from 6.7% in 2016, the National Bureau of Statistics said. Japan's Nikkei closed down 0.4% after earlier topping 24000 for the first time since November 1991.
With a number of Asian stock markets pulling back in the afternoon, it resulted in Australia's benchmark ending barely lower after a sizable at-the-close adjustment. The S&P/ASX 200 fell 1.2 points to 6014.6, its 3rd-straight drop. Offsetting gains by some of the country's big banks was a 1.1% drop in energy stocks despite modest increases in oil prices the past day. Meanwhile, BHP Billiton and Rio Tinto stabilized after yesterday's sharp pullback, but fellow metals firm South32 slid 2.6% amid weakness in the wider materials space.
The London Metal Exchange’s 3-month copper contract traded higher overnight, rebounding 0.6% to finish at $7,076/t. The other base metals finished mixed. Aluminium prices rose 2.3% to 2,244/t, and lead prices jumped 2.6% to close at 2,606/t. Zinc prices were 0.2% weaker at 3,400/t, whilst nickel prices recovered 0.6% to 12,421/t. Tin prices slipped 0.3%, closing at 20,465/t.
In this issue
Industrials | Micro Caps | Interims preview
In our FY17 results preview (August 2017) we flagged GRB and CLX as top picks in our ‘microcap’ universe. The share prices of both stocks have performed well since then. GRB has more than doubled, while CLX’s >20% gain has pushed the Company into our ‘small cap’ universe. Our key picks heading into FY18 interims are TPS and BOT. TPS turned the corner in 4Q17, has earnings visibility and a clear growth strategy, and we believe offers the best value among our microcap stocks that have earnings. Out of the earlier stage speculative stocks we believe BOT, with its more imminent catalysts, presents the most likely case for near-term gains.
Recent Contacts & Presentations
Ramelius Resources Ltd (RMS), MOD Resources Ltd (MOD), Greenland Minerals & Energy Ltd (GGG), Walkabout Resources Ltd (WKT), Marindi Metals Ltd (MZN), Volt Power Group Ltd (VPR), PharmAust Ltd (PAA), Alice Queen Ltd (AQX), Jervois Mining Ltd (JRV), St George Mining Ltd (SGQ), Overland Resources Ltd (OVR), Metro Mining Ltd (MMI), Botanix Pharmaceuticals Ltd (BOT), Xanadu Mines Ltd (XAM), Orthocell Ltd (OCC), Whitebark Energy Ltd (WBE), Atrum Coal Ltd (ATU), Minotaur Exploration Ltd (MEP), Panoramic Resources Ltd (PAN), Sino Gas & Energy Holdings Ltd (SEH), Great Boulder Resources Ltd (GBR), Metallum Ltd (MNE)